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In recent years, construction employers have complained about difficulty in finding skilled workers and asked Congress for reforms to the immigration system to address the issue. The data support their on-the-ground impressions. Since 2000, the labor market in construction has never been tighter than it was in 2017. Immigration reform would help employers find skilled workers and increase production in the construction industry.

Some commentators compare construction employment to other industries in order to evaluate its need for workers, but this is inappropriate. Construction projects are by their nature temporary and often seasonal, and so the natural rate of unemployment at any given time will always be higher for construction than other industries. For this reason, it is important to compare the construction labor market today to its labor market in prior years. This tells us how difficult it is for employers to fill jobs—how “tight” the labor market is—given the industry’s peculiarities. 

The best measure of labor market tightness is the unemployment rate relative to the job openings rate. Following the housing bust, the average unemployment rate in construction shot up to nearly 20 percent in 2009, while the number of job openings averaged less than 1 percent of all construction jobs in that year: the unemployment rate was 22 times higher than the openings rate. As Figure 1 shows, the unemployment rate was only 2.3 times higher than the job openings rate in 2017. In other words, the labor market was almost 90 percent tighter in 2017 than in 2009. No year on record had an average as low as 2016 and 2017 did.

Figure 1: Unemployment Rate Relative to Job Openings Rate, 2000* to 2017.

Sources: Bureau of Labor Statistics JOLTS Survey; Bureau of Labor Statistics, *Only December

Another way to view this information is to plot the unemployment rate and job openings rate for each month on a scatter plot. Figure 2 incorporates each month since 2001. In the figure, the further up and to the left a point is the tighter the labor market was in that month. The points with the 35 tightest labor markets are colored separately. The yellow months are 2017; the red 2016; and green and dark green 2006 and 2007, just before the housing bubble collapsed. More than half of the 35 tightest months for the construction labor market were in 2016 and 2017. Only four months out of the 35 were in years other than 2016-17 or 2006-7—each was in 2005 or 2015.

Figure 2: Unemployment and Job Openings Rates for Each Month, 2000-2017, 35 tightest Labor Markets Highlighted

Sources: Bureau of Labor Statistics JOLTS Survey; Bureau of Labor Statistics

While the Bureau of Labor Statistics has only collected job openings data since December 2000, the Current Population Survey has collected monthly industry-specific unemployment data since 1994. But even focusing solely on the unemployment rate, only one year (2000) had a lower unemployment rate than 2017’s rate.

The construction industry is booming, and restrictions on the ability of these firms to hire foreign workers ultimately limit production and raise prices.

We didn’t learn anything from this morning’s argument in Janus v. AFSCME, which asks whether state laws that compel the payment of “agency fees” by nonmembers of public-sector unions violate the First Amendment by forcing those workers to support policy positions they don’t like. None of the eight justices who heard the Friedrichs case on the same issue two years ago—which ended up 4-4 after Justice Antonin Scalia’s death—appeared to have changed their minds. The ninth, Justice Neil Gorsuch, didn’t ask a single question or otherwise show his hand. The whole exercise seemed like redundant pointlessness.

Justice Ruth Bader Ginsburg opened the questioning by asking about the validity of student activity fees and bar dues if Illinois state employee Mark Janus were to prevail, as well as how such a ruling would affect private-sector unions. Janus’s lawyer, Bill Messenger, responded that different state interests were at play there and that there’s no state action in the private sector and so no First Amendment harm. (Justice Scalia, in a 25-year-old case called Lehnert v. Ferris Faculty Association, made the same point, which is why he was considered the swing vote in Friedrichs—though he showed himself to unambiguously be on Rebecca Friedrichs’s side during oral argument in that case.)

Justice Elena Kagan expressed concern about the practical impact of a ruling that struck down the laws of 22 states that allow agency fees, which would also affect thousands of collectively bargained contracts. As expected, much of the questioning focused on stare decisis—the weight of a 40-year-old precedent that needs to be overturned for Janus to win—an issue that Cato’s amicus brief focused on.

Messenger explained that the law works fine in the other states, the contracts would all expire in the next few years at most, and that in any event, maintaining an unconstitutional contract can’t be a valid reliance interest. Solicitor General Noel Francisco, siding with Janus, added that the contracts were negotiated “in the shadow of” two recent opinions, Knox v. SEIU and Harris v. Quinn, that threw serious doubt on Abood’s continuing validity.

On the other side, Justice Anthony Kennedy showed palpable disgust at the idea that the government would force people to pay for advocacy with which they disagreed, particularly given the reality that unions uniformly advocated for larger workforces, higher taxes, and generally bigger government. Frankly, the only time I’ve seen him as exercised was when he orally summarized the joint dissent in NFIB v. Sebelius, the 2012 Obamacare case.

Justice Samuel Alito, the author of the Knox and Harris decisions, pointed out that the Constitution also doesn’t require that unions represent non-members—that it was state laws that made unions workers’ exclusive representative. He also took umbrage at the argument that public-sector workers don’t have First Amendment rights.

Justice Stephen Breyer floated a sort of compromise by offering that the agency fees should really only go to union expenses on negotiating wages and hours and on grievance procedures. In other words, that old precedent, Abood v. Detroit v. Board of Education, would be tightened rather than overturned.

It’s unclear whether Chief Justice John Roberts, whose minimalism often tilts toward narrow rulings, would make that deal. He poo-pooed the harm to unions from a ruling in Janus’s favor—they would just need to become more efficient and effective to attract members, he said—and repeatedly expressed concern that even bargaining over wages affects state budgets and thus has public-policy salience.

The smart money remains that Gorsuch will vote with Justices Roberts, Kennedy, Thomas (who also remained silent), and Alito in supporting Janus’s lawsuit. Of course, as one observer mentioned to me, Roberts was silent (update: nearly) in King v. Burwell, the 2015 Obamacare case, and we all know how that ended up. We’ll know in June.

This post is edited down from an op-ed published in the Washington Examiner.

On Saturday (Feb. 24), House Intelligence Committee Democrats were finally able to publish their rebuttal to the “Nunes Memo” written by the committee’s GOP majority staff and released earlier this month. So what have we learned from this Democratic rebuttal memo? As it turns out, not much we didn’t already know—though you wouldn’t get that impression from the media’s reaction to and characterization of the “Schiff Memo” following its release. 

NPR’s Philip Ewing and his editors preferred to treat the dueling memos episode as a game:

The more a game is played, the more adept teams become at its rules and strategies. Basketball defenders deliberately foul an opponent to force a free-throw. A manager brings up a left-handed reliever to pitch inside to a dangerous left-handed hitter.

The Republican memo gambit and last weekend’s Democratic riposte complete the first enactment of what could become a recurring sideshow inside Washington. The majority uses its control of the committee and its alliances inside the executive branch to release an unexpurgated file even if some of the relevant agencies object—as the FBI and Justice objected to the release of the Nunes memo.

The minority can’t twist the arms of the agencies controlled by its opponents and it can’t get parity with the opening shot: Nunes’ memo was released by lunchtime on a Friday following a week of extensive coverage. Schiff’s memo came out with no preliminary fanfare on a Saturday afternoon.

So will this be the template for each game? Or will Nunes and Schiff take a different approach next time? And with the rules more or less set, how will other players respond? Round Two is already different: Nunes suggested he was preparing another memo about what he calls problems with President Obama’s State Department. So a former State official wrote a column in the Washington Post that tried to short-circuit that attack.

So for NPR, allegations of FBI/DoJ potential misuse of the FISA process is like watching a Wizards-Celtics match-up on ESPN.

Other media outlets claimed the “Schiff Memo” entirely rebutted House Intelligence Committee chairman Devin Nunes’ (R-CA) case against the FBI:

Democratic members of the House Intelligence Committee on Saturday released a memo countering key claims made by their Republican colleagues, the latest chapter in Republican efforts to undermine special counsel Robert Mueller’s ongoing investigation into possible collusion between President Donald Trump’s 2016 campaign and Russian efforts.

The 10-page document reads: “FBI and DOJ officials did not ‘abuse’ the Foreign Intelligence Surveillance Act (FISA) process, omit material information or subvert this vital tool to spy on the Trump campaign.”

Former DoJ attorney and Georgetown Law professor Carrie Cordero went further in comments she made to WIRED:

“This memo repudiates a key allegation that was made in the Nunes memo: that the FBI and DOJ were untruthful to the FISC,” says Carrie Cordero, an adjunct professor at Georgetown Law School who has worked directly on FISA process issues. “That allegation went to the heart of the integrity of the FISA process, and as a former FISA practitioner, I’m glad to see it debunked.”

As the legal saying goes, those are facts not in evidence.

Both memos make claims and counterclaims that are designed to advance partisan narratives. For Democrats, the narrative is that the FBI & DoJ have behaved above reproach in this whole matter; for Republicans, the FBI & DoJ careerists have it in for a chief executive they despise and do not trust.

There’s no question in my mind that the “Nunes Memo” was not a series effort to determine what really happened in the Carter Page FISA affair, and the “Schiff Memo” does a good job of highlighting demonstrable inconsistencies or even outright errors in the GOP majority staff memo.

But the job that Nunes and Schiff are charged with is not to take the word of DoJ or IC officials at face value (as Schiff clearly does) or to start from the proposition that every DoJ or IC official involved in the Carter Page FISA application process is a sworn political enemy of Trump (as Nunes clearly does). To determine actual ground truth in this episode, the Committee and the public need several things we do not currently have in a publicly available form.

The FISA application and renewals targeting Trump campaign advisor Carter Page

No real evaluation of what did or did not happen in this episode can take place until all FISA applications targeting Carter Page are made public. A number of House members on both sides of the aisle have called for this, but it remains to be seen whether it will happen anytime soon.

All other internal DoJ and Intelligence Community correspondence dealing with the Page FISA application and renewals

I’m deep in the research phase on a book that will cover at least 120 years of U.S. government domestic surveillance and political repression activities, and one key lesson I’ve relearned is how critical it is to have access to the background material produced by officials in the lead up to a major decision. Such material can reveal the actual intent and mindset behind a particular policy initiative, in contrast to the publicly stated intent at the time the final decision is announced or taken.

In the Carter Page episode, any emails, text messages, or other correspondence between or among officials at the Justice Department, FBI, NSA, and Office of the Director of National Intelligence regarding the Page FISA application and renewals are absolutely relevant in order to determine whether or not the FISA application and renewals were indeed legitimate under law or simply a cover for a politically-motivated misuse of surveillance authorities and powers. And it’s not as if the DoJ and NSA have a pristine record of complying with the law vis a vis the FISA Court and its rulings, as the Demand Progress report on DoJ/IC FISA misdeeds documented last year.

A real examination of the workings of the FISA Court

On February 15, FISA Court presiding judge Rosemary Collyer responded to a Nunes request for FISA Court transcripts in the Page affair, the opening paragraph being the key one:

I write in response to your letter of February 7, 2018, in which you request that the Foreign Intelligence Surveillance Court confirm whether “transcripts of relevant FISC hearings associated with” matters described in the letter exist and, if so, provide copies to the Committee. As you know, any such transcripts would be classified. It may also be helpful for me to observe that, in a typical process of considering an application, we make no systematic record of questions we ask or responses the government gives. (emphasis added)

If no transcript of the proceedings was made during the original or subsequent DoJ appearances before the FISC in filing the FISA application or its renewals, exactly how are we to know how thorough the FISC judge who approved the application and renewals was in examining DoJ’s claims about Page? Why aren’t such transcripts mandatory in any proceeding involving a warrant application to spy on a U.S. citizen?

These and other questions about the function—or dysfunction—of the FISA Court need to be answered via a real investigation of the court’s operations and practices. It would be a great project for the House and Senate Judiciary Committees to undertake, or perhaps even GAO, especially since the House Intelligence Committee seems far more interested in waging partisan warfare through selective releases of incomplete information on the Page FISA episode.

 

 

 

The Supreme Court hears arguments today regarding the ability of state governments and their labor unions to extract union fees from unwilling employees. The case involves an Illinois state worker who decided not to join the AFSCME union that covers his job, but is being forced to pay a $45 per month “agency fee” to the union nonetheless.

Illinois is one of 23 states that allow unions to impose agency fees on nonmembers. The other 27 states allow people the “Right To Work” without unions picking their pockets. There has been a shift toward Right to Work in recent years, but the chart below shows that while union membership has plunged in the private sector, it has remained high in state and local governments.

Prior to the 1960s, unions represented less than 15 percent of the state-local government workforce. That changed during the 1960s and 1970s, as a flood of state laws triggered a dramatic rise in public-sector unionism. Many states passed laws that encouraged or required collective bargaining in the public sector, while also imposing compulsory union fees. The chart shows that we had reached today’s high rates of public-sector unionism by the early 1980s, which is when hard data on membership begins.

In 2017, 30.3 percent of state government workers and 40.1 percent of local government workers were union members, compared to just 6.5 percent of workers in the private sector. The combined state-local rate of union membership at 36.1 percent is more than five times higher than the private-sector rate. The most recent BLS data is here.

Why the public-private difference? Public agencies are static—once a union has organized a group of workers they tend to stay organized. By contrast, the private sector is dynamic, with businesses going bankrupt and new businesses arising all the time. Since all new businesses start out as nonunion, greater organizing efforts are needed to sustain private-sector unions.

Another factor is that many government services are legal monopolies, such as police and fire. The result is that consumers do not have the option of abandoning unionized public services if they become too expensive and inefficient, as they can do with unionized services in the private sector.

The Supreme Court case has to do with requiring public-sector employees to pay union fees. However, the more fundamental issue is so-called collective bargaining, or monopoly unionism. In both the public and private sectors, collective bargaining gives unions the exclusive right to speak for covered workers on workplace issues, many of whom may disagree with the union’s views. Dissenting individuals are prevented from dealing directly with their employer, and they cannot choose to be represented by another organization. So workers’ freedom of association is violated not just by mandatory union fees, but by collective bargaining in general.

Charles Baird explains:

Exclusive representation is a violation of voluntary exchange. It implies that an individual does not own his labor. Rather, a majority of his colleagues own it. It is a violation of a dissenting worker’s freedom of association. Freedom of association in private affairs requires that each individual is free to choose whether or not to associate with other individuals, or groups of individuals, who seek to associate with him. Freedom of association forbids any kind of forced association, even by majority vote. The sale of one’s labor services to a willing buyer is a quintessentially private act.

The Supreme Court may advance the cause of worker freedom in the current Illinois case, but broader labor union reforms are also needed, as Baird explains here.  

For further background on public-sector unions, see here.

For background on collective bargaining see here.

For Cato’s legal brief on the Illinois case, see here.

 

 

 

 

 

 

 

I spoke on a panel at CPAC with three conservatives—Scott Walter of Capitol Research Center, Ralph Hallow of the Washington Times, and Congressman Michael Burgess (R-TX)—moderated by Christopher Malagisi of Conservative Book Club (starts at 1:02:00). My main takeaway was that economics is not a major concern among the conference goers, though the congressman emphasized it. Both the audience and panel were overwhelmingly concerned with issues of assimilation, crime, and politics.

My View: Evidence Is Overwhelming in Favor of Immigration

In my opening statement, which you can watch here, I argued that conservatives should not act as liberals do on many issues. Liberals focus on mass shootings, not on the numerous cases of defensive gun use. Many liberals also ignore the incredible wealth that capitalism has created, preferring to highlight those people in capitalist societies who have been relatively less successful. In other words, liberals tend to focus on the exceptions to the rule.

Unfortunately, conservatives often act similarly on immigration. They focus on immigrant crime, even though the U.S. Census Bureau tells us that immigrants—including illegal immigrants—are more than half as likely to be incarcerated in the United States. They highlight the fiscal costs of immigrants, even though the National Academy of Sciences 2016 report found that the average recent immigrant will pay at least $92,000 more in taxes than they receive in benefits over their lifetime (in net present value terms).

On assimilation, English language comprehension at arrival is at its highest levels on record. Today’s immigrants integrate quickly into the labor market, acquiring jobs at higher rates than the U.S.-born population. Two-thirds of eligible immigrants have already become citizens. On policy, while there are a few differences between noncitizens and U.S.-born citizens, the General Social Survey finds no statistically significant differences between naturalized and U.S.-born citizens on almost any major policy area except immigration.

In conclusion, I argued that just as liberals want to grow the government and take away liberties to deal with exceptions in the free market or on guns, many conservatives want to spend billions of dollars on infrastructure to keep out people who would happily come to this country legally. They want to create an electronic national identification for every U.S. worker and every U.S. employer (called E-Verify), and they want government agents—as is already happening—to stop motorists and board trains and buses and demand that people prove their citizenship to them.

My message was simple: stop highlighting the exceptions as liberals do on guns or capitalism and pay attention to the big picture or it will inevitably lead to bigger government and less freedom.

Their View: Little Evidence Is Needed

In response, Ralph Hallow simply denied the fact that conservatives abuse civil liberties on immigration. Tell that to the ranchers on whose lands the wall is being built or the motorists and bus riders who Border Patrol targets for stops. Instead, he characterized my view as rejecting the idea that “we have a right to decide who comes into our nation.” I didn’t directly address that point, but it’s worth noting that in the U.S. tradition, governments have powers, while individuals have rights. In any case, I never challenged the government’s power to restrict entry of certain individuals to the United States.

Hallow also asserted (without evidence) that I could not give him “a shred of evidence” to indicate that immigrants are successfully assimilating. I will refer the reader above. He also implied that no one in the world appreciates “the ultimate worth of the individual” outside America and Western Europe, which I felt was odd given the common conservative view on Europe is that they are a bunch of socialists. Later, he emphasized that he felt immigration was problematic because “we used to worship our presidents” in public schools, but not anymore. If true, that seems like an improvement to me.

Scott Walter spoke about John Fonte’s work on “patriotic assimilation” without directly stating that immigrants aren’t patriotic, just that more attention needs to be paid to patriotism. I thought Walter’s tone and his discussion was completely reasonable, and I wish we could have discussed improving the naturalization process more. That said, Fonte’s work relies almost entirely on a single poll from 2008 and doesn’t compare the immigrant responses today to those in the past. In any case, Alex Nowrasteh has written about Fonte’s work here and here, showing that immigrants report the same level of trust in U.S. institutions and the same level of patriotism as U.S.-born citizens across a variety of measures.

The other major concern that came up repeatedly was purely partisan: that immigrants will vote for Democrats. I noted that in fact, Republicans only do well during periods when the share of immigrants is high. From 1935 to 1994—the entire period when the immigrant share of the population was below 10 percent—Republicans controlled the House of Representatives only twice. The rest of GOP history, it has dominated the House 70 percent of the time. 

Congressman Burgess made the only two concrete factual points that I noticed, neither of which I responded to directly. First, he claimed that the border security promised after 1986 never came. However, the number of Border Patrol agents has increased by 600 percent since 1986 and the Border Patrol budget rose in real terms thirteen-fold. The spending and money had little effect, which is maybe what he meant, but it is nonetheless the case that illegal immigration has fallen by 97 percent since then (mainly due to increases in legal immigration, not enforcement).

Second, the congressman claimed that the United States accepts more immigrants than the rest of the world combined. According to the United Nations estimates, the United States is home to less than one in five of the world immigrant population, and from 2014 to 2016, it accepted less than one-sixth of total net immigration. I attacked the question differently, pointing out that controlling for population, the United States has nowhere near the highest rate of immigration: among the top 50 wealthiest countries, the United States ranks in the bottom third. For some reason, the audience and two panelists really objected to controlling for population. I guess they consider Chinese three times wealthier than Germans because China’s total GDP is three times larger than Germany’s, even though China’s per capita GDP is five times smaller.

Congressman Burgess was the only one to mention economics, demanding that the growing economy be reserved for Americans only (without explaining why). But the response—though positive—was more muted than the excited cheering for negative comments about immigrant assimilation. People care less about economics than about cultural factors and personal fears. By contrast, the audience questions concerned crime (2) or language assimilation (2), relying mainly on personal experiences or misleading statistics. 

Some conservative writers are proposing to raid Social Security for the costs of a new parental leave program. Proponents are selling it as a sort-of free lunch. The plan would be “self financing” says the IWF’s Kristin Shapiro because “new parents would agree to defer their collection of Social Security benefits upon retirement for the period of time necessary to offset the cost of their parental benefits.”

But Social Security is not a savings program with a pool of assets to draw on. If the government starts mailing checks to millions of new parents, the only “financing” would be more federal borrowing. What Shapiro calls $7 billion a year in “parental benefits” would be $7 billion more in government spending. What Shapiro calls “self financing” would be more government debt.

In theory, the government would delay retirement handouts for participating individuals three decades down to the road. But, if enacted, lobby groups and politicians would get to work undoing those future savings. And if this sort of accounting trick is used for spending on parental leave, then the flood gates would be opened for Social Security spending on home purchases, job training, and other trendy causes.

What ever happened to personal saving? Humans can look ahead and plan, and they have been doing so since the beginning of time. Personal saving is the most powerful financing tool. But the more the government hands out benefits—for retirement, health care, unemployment, parental leave, and many other things—the more it undermines the innate and responsible saving incentive. The more the nanny state spends, the more it sabotages a culture of savings and the practical ability to save as taxes rise.

Young people thinking about having children should start setting aside some of their paychecks. Young people should be taught that kids are expensive, and they should plan accordingly. Alas, personal responsibility and saving are not the starting points for most policy discussions these days.

Put aside parental leave, and think about farm programs. The government spends $20 billion a year to cushion farmers from fluctuations in prices and crop yields. It apparently never occurs to policymakers that farmers should be using their own savings to level out their consumption over time. When corn prices are high, they should be saving the extra profits. When corn prices are low, they can withdraw. Wouldn’t that be easier than writing thousands of pages of farm legislation and extracting $20 billion a year from taxpayers?

At the bottom of Shapiro’s piece, it says the IWF believes that women are “better served by greater economic freedom” than “big government.” Thus, for parental leave, the focus should be on personal responsibility and savings rather than big government spending.

Part of the solution is to cut taxes on saving and make saving simpler, as Ryan Bourne and I discuss in our study on Universal Savings Accounts (USAs). The tax code includes numerous savings vehicles for retirement, but all savings are beneficial. USAs would facilitate personal savings to cover health care, education, parental leave, and many other costs. If Americans had larger pools of savings, they would be more self-sufficient and less dependent on government.

When thinking about policy reforms, the first goal should be to increase the self-sufficiency of Americans and reduce today’s overreliance on government. USAs would not solve every problem, but they would allow Americans to better prepare for their own financial challenges.

Vanessa Brown Calder critiques the paid leave proposals here and here.

In a Cato study last year, I argued that the U.S. policy of maintaining hundreds of permanent forward-deployed military bases around the world is not only unnecessary, but also actually counterproductive in some ways. Advocates of forward-deployment claim it pacifies the international system by deterring adversaries and reassuring allies, thus ameliorating conflict spirals and staving off interstate wars.

I argued instead that today’s lower rates of interstate conflict are a result of many factors – including defense dominance, economic interdependence, changing norms, etc. – other than forward basing and the security guarantees that underlie them. I further claimed that forward bases can actually undermine peace and stability by incentivizing “reckless driving” by allies and counterbalancing by adversaries. This is a view deeply at odds with the prevailing opinion in the Washington, DC foreign policy establishment.

Yet a new study from the RAND Corporation bears some of my analysis out. RAND researchers developed a statistical model to see how U.S. overseas bases correlated with interstate conflict. Though they find that “on average, U.S. troop presence was associated with…a lower likelihood of interstate war,” they concede their model can’t determine causation and can’t account for the impact that other factors (mentioned above) have had on the reduction of interstate conflict in the post-WWII period.

And while the study suggests there is good evidence for the restraining effect that U.S. bases have on allies (see here for a study suggesting otherwise), it also finds that stationing U.S. troops and bases overseas is “associated with a higher likelihood of low-intensity interstate conflict” and that “a large nearby U.S. troop presence was associated with potential U.S. adversaries initiating more low- and high-intensity conflicts.”

“Adversary states,” according to RAND, “are more likely to initiate a high-intensity MID [militarized interstate dispute] against a target state when the United States maintains a large troop presence in that target state. This suggests that adversaries may be threatened by U.S. forward presence abroad, leading to an increased risk of militarized behavior.”

For example, the authors of the study argue that U.S. basing in the Baltic states may deter Russia from initiating major war against them, “but also may lead to the initiation of more disputes and provocations [short of all-out war] by Russia against the Baltic states.” Similarly, U.S. military presence in and near the South China Sea may play a role in deterring China from outright attacking neighboring states with competing maritime and territorial claims, but also “may lead to the intensification of Chinese militarized activities and provocations toward the partner states that host U.S. forces.” Another example is the Korean Peninsula. “U.S. troop presence has likely deterred North Korean aggression against South Korea,” the RAND study concludes, “but it has potentially done so at the cost of numerous militarized activities and provocations by North Korea during many decades.”

This should not be construed to mean that, in the absence of U.S. bases or security guarantees, Russia would conquer the Baltic states, or China would attack the Philippines, or North Korea would initiate war with South Korea. Each of these adversaries has good reasons - other than the threat of a U.S. response - not to take such action.

Here is the real kicker. Another argument in my own Cato study was that having all these bases and troops permanently stationed abroad has the effect of expanding the scope of perceived U.S. interests, thus increasing U.S. military interventionism abroad. The RAND study concurs:

Some analysts contend that U.S. involvement abroad actually leads to an expansion of U.S. security concerns and issues over which it is willing to use force. Frequent diplomatic interactions can lead to socialization, where the U.S. leaders adopt partners’ local security concerns. Moreover, once the United States makes a commitment to a partner, U.S. policymakers may also begin to see U.S. credibility at stake in any of the partner’s disputes. The United States may, in turn, be more likely to initiate or become involved in militarized conflicts to protect these interests. U.S. forward troop presence may contribute to the expansion of these concerns. U.S. military presence in partner states creates more opportunities for socialization, described above, and further ties U.S. reputation to its partners’ security. Moreover, forward presence may make the United States more sensitive to the capabilities and intentions of nearby states that could pose a physical threat to local U.S. personnel or infrastructure. The need to defend forward deployments and support regional partners may expand the domain of issues in which the United States is willing to use force, thereby increasing the risk that the United States initiates conflict abroad.

That’s an important finding. U.S. military activism has indeed spiked in the post-Cold War era, though we’re not better off for it. If forward-deployment pushes the United States to use military force with greater frequency and in more locations for what would otherwise be peripheral interests, that should be deeply concerning to Americans.

A new federal paid leave idea has been produced, promoted, and endorsed by individuals on the right. And now Republican legislators like Marco Rubio, Joni Ernst, and Mike Lee are getting behind it.

Advocates propose using Social Security as a benefit bank for paid leave – the idea is that parents could withdraw Social Security benefits today if they defer collecting benefits later. Of course, if advocates want to provide paid leave, a better idea is cutting Social Security benefits and payroll taxes so new parents don’t have to ask the government for their money back.

Still, it’s a clever idea and maybe the least-bad proposal for federal paid leave. But that does not mean the Social Security paid family leave (SS PFL) proposal is a good idea on its own merit. As described in The Hill yesterday, government-provided paid leave has harmful consequences and is not politically supported. 

Setting that aside, Social Security is a program with an assortment of problems, and allowing beneficiaries to borrow against future benefits does not improve the current model. Given how integral Social Security is to the current proposal, it’s worth a reminder just how deep those issues run.

First, Social Security will shortly be insolvent. Due to Social Security’s structure and demographic trends which include an increase in life expectancy, a decrease in fertility rates, and slowing wage growth, the value of Social Security’s obligations is estimated to exceed the value of its taxes in present value by $8.6 trillion over the next 75 years. (And no, providing paid parental leave and other parental benefits won’t change fertility trends meaningfully.)

In short, there are increasingly more retirees collecting benefits for every worker paying for them. To illustrate, in 1950 there were 12 people older than 65 for every 100 people of working age. By 2050, there are expected to be 35 people older than 65 for every 100 people of working age.

This makes Social Security unsupportable in its current form. The program is already running a cashflow deficit and in trouble financially. Indeed, the Social Security Administration (SSA) projects the present-value of Social Security’s unfunded financial obligation is equal to $32.1 trillion through the infinite time horizon. 

How will adding SS PFL change that? AEI’s Andrew Biggs says that in the long-run the SS PFL proposal is budget neutral. But in the short-run, the proposal increases Social Security’s financial obligations, thereby hastening Social Security’s decline toward insolvency. It would be one thing if Social Security was based on personal savings accounts and the proposal allowed people access to their savings more flexibly. But Social Security has no pool of savings, so the proposal means going deeper into debt to provide parental benefits. 

The most generous argument is that the SS PFL proposal does everyone a favor, because it forces lawmakers to grapple with Social Security’s problems sooner than they would otherwise. What will that reform look like? If historical precedent is any indication, it will involve increasing taxes and perhaps reducing benefits.

Social Security taxes have already grown substantially over Social Security’s lifetime: from a payroll tax of 2 percent at its inception in 1937 to a tax of 12.4 percent today. Indeed, during Social Security’s most recent reform in 1983, taxes were raised in a variety of ways. Recent proposals for reforming Social Security have also suggested expanding taxes to pay for the program.

Of course, benefits have also been reduced in past reforms. But with more obligations to more interest groups (parents, the sick, etc.) under a new version of the program, it will be increasingly difficult to reduce benefits because more groups will be impacted by cuts. 

It seems that an underlying premise of the SS PFL proposal is that nothing major can be done to reform Social Security in the short-term anyway, so let’s enjoy the ride down. Another underlying premise is that Democrats will eventually get their way on paid leave, so let’s preempt it and give them what they want.

Unfortunately for advocates, the current proposal is not what Democrats want, and it’s unlikely they’ll be satisfied. The SS PFL proposal conveniently leaves the door wide open to provision of more generous benefits in the future.

In the meantime, Republicans will have conceded substantial ground, hastened Social Security’s decline, and legitimized the provision of paid parental leave at the federal level.  If history is any indication, more taxes will be part of the solution.

 

President Trump wants to cut legal immigration by more than 40 percent, complaining that the system focuses on family reunification rather than skills. In defending the plan, Attorney General Jeff Sessions generalized today’s immigrants as largely “illiterate”, with “no skills”, and argued that America “should be like Canada” on immigration, evaluating them on their skills. Yet, recent U.S. immigrants are better educated the U.S.-born, and differ little from recent Canadian immigrants.

Figure 1 provides the educational attainment distribution for U.S.-born working-age adults (25-64) compared to recent U.S. working-age immigrants (arrival from 2012 to 2016). As it shows, nearly half of all recent working-age immigrants had a college degree or higher, compared to just 32 percent of the U.S.-born working-age population. Recent immigrant workers to America are 50 percent more likely to have graduated college than U.S.-born workers. Moreover, among college graduates they are much more likely to have advanced degrees.

Figure 1: U.S.-Born Citizens and Recent Immigrants to the United States by Education, Ages 25-64*

Sources: American Community Survey, 2016 5-Year Sample *Including all adults over 25 reduces recent immigrant share of bachelor’s degrees to 47 percent and U.S.-born share to 30 percent

Figure 2 provides the educational attainment distribution for recent working-age immigrants to the United States compared to recent working-age immigrants to Canada (arrival from 2012 to 2016). As it shows, recent working-age Canadian and U.S. immigrants have very similar educational profiles, with an almost equal ratio of college graduates to non-graduates. U.S. recent immigrants with a college degree are a bit more likely to have an advanced degree.

Figure 2: Recent Immigrants to the United States and Canada by Education, Ages 25-64

Sources: American Community Survey, 2016 5-Year Sample; Statistics Canada

Canada’s overall immigrant population is slightly better educated than the United States’. Figure 3 provides the educational attainment distribution for all working-age immigrants to the United States compared to all working-age immigrants to Canada. Even looking at the entire population, however, the U.S. immigrant population ends up looking very similar to the U.S.-born population, with only minor differences in educational attainment.  

Figure 3: Recent Immigrants to the United States and Canada by Education, Ages 25-64

Sources: American Community Survey, 2016 5-Year Sample; Statistics Canada

These figures modestly understate the degree to which the U.S. legal system results in the immigration of educated workers because nearly a quarter of all U.S. immigrants are illegal, and illegal immigrants are less educated than other immigrants. Canada has relatively fewer illegal immigrants.

More important than the shares of the flow is the absolute quantity of the flow to each country. While Canada has a similar share of less educated immigrants, it allows far more of them to immigrate, relative to its population, because its immigration rate is so much higher than the U.S. rate. In other words, the United States is far less welcoming overall to less educated immigrants than our northern neighbor.

The claim that U.S. legal immigration policy is highly skewed toward “illiterates” who lack skills to succeed in America has no validity. In fact, even family-sponsored immigrants and diversity lottery winners are better educated than the U.S.-born. In any case, less educated immigrants bring skills and contribute in important ways to the United States, and they are successful on all standard measures. But ultimately, reforming immigration policies should start with the facts about the immigrants that we already have, not myths and conjecture.

Historian Harold James of Princeton University, known for his scholarly writings on the gold exchange standard and on the euro, has turned his attention to Bitcoin in a recent Project Syndicate commentary on “The Bitcoin Threat.” His commentary labors under a surprising number of misconceptions about Bitcoin and the history of privately issued currency. If even a reputable academic historian falls prey to these misconceptions, they are likely to be widespread. Scrutinizing them may then be of wider interest.

After noting some of the optimistic claims made on behalf of cryptocurrencies and the blockchain technology underlying them, James cautions us:

But others are rightly suspicious that this new technology might be manipulated or abused. Money is part of the social fabric. For most of the history of human civilization, it has provided a basis for trust between people and governments, and between individuals through exchange. It has almost always been an expression of sovereignty as well, and private currencies have been very rare.

To say that government-issued currencies have “provided a basis for trust,” and to imply private currencies have not, is a curious summary of centuries of monetary history. Anyone familiar with the long history of debasements by ancient and medieval government mints, or with the history of fiat money inflations by modern government central banks, knows that governments have often been untrustworthy issuers. Sovereigns have frequently abused rather than rewarded trust in their currencies. (To his credit, James does later observe that “bad states produce bad money.”) Indeed a key service that attracted medieval merchants to private bankers was their more trustworthy payment alternative to the variously debased government-issued coins, namely a ledger-based system where transferable account balances were denominated in units of unchanging silver content. Historians later called these stable private accounting units “ghost monies” because they were not embodied in any of the debased contemporary coins.

James’ statement that “private currencies have been very rare” is simply untrue. It is a surprising misconception for a financial historian to hold. Private silver and gold coins were historically rare, it is true, because governments have legally suppressed private mints to give their own mints monopoly privileges. But during the 18th and 19th centuries, redeemable paper currency became more popular than coins in modern economies, and the majority of paper currency in circulation in most countries consisted of privately issued banknotes. Kurt Schuler and Will McBride report that more than sixty countries have had periods of competitive private note-issue, so it was hardly a “very rare” experience.

Banknotes are a banking product, and banking is normally a private business, so it should not be surprising that the very first known banknotes were introduced by businesses and not by a government. Schuler and McBride write that “the first true circulating notes were issued” around the year 995 “by private bankers in the city of Chengdu” in China. Similarly, “In Europe, the first true circulating notes were issued in 1661 by Stockholms Banco, a private bank chartered by the crown.”

In the United States before the Civil War, the vast majority of paper currency was issued by private state-chartered banks. The only governmental or quasi-governmental notes were those issued by the short-lived first and second Banks of the United States (whose shares were 80% in private hands) and by state-government-owned commercial banks in a few frontier states. After the Civil War, private banks with federal charters (the “National Banks”) continued to issue notes into the 1930s. In the United Kingdom, all banknote issuers including the Bank of England were private before the First World War. Even if we were to consider the BOE “non-private” after it gained special privileges in the Bank Charter Act of 1844, other private banking companies issued 43 percent of the notes in circulation in 1851, to pick a mid-century year. Canada’s banknotes were entirely private before the provinces (later The Dominion) began issuing small notes in 1866, and there private banknotes continued in circulation until the 1940s.

When it comes to the operations of Bitcoin, James exhibits additional misconceptions. He comments that “Bitcoin looks like a twenty-first-century version of gold, and its creators have even embraced that analogy.” I discussed here recently what the Bitcoin system has in common with a gold standard, and how it differs in important ways. James’ statement that Bitcoin’s “creators have even embraced that analogy” seems to refer to the term “mining” being used metaphorically to refer to the operation of Bitcoin validation nodes. But in writing that Bitcoin “is produced — or ‘mined’ — through effort,” James appears to have been misled by the term. Bitcoin “mining” validates payments. Unlike gold mining, growth in the number of computers “mining” bitcoin does not increase the rate at which the total stock of bitcoin grows. It only adds more competition to be the mining node that receives the reward in new coins for processing the next transaction block (by being first to solve a mathematical guessing problem, the difficulty of which is endogenously adjusted to keep the expected solution time at ten minutes). New coins are awarded at a rate that is predetermined by the source code. Thus, a new miner who adds a computer to the system “produces” expected new bitcoins for himself, but not for the system as a whole.

The most dramatic of James’ ill-founded claims come in the commentary’s penultimate paragraph — which is hard to read as anything but rather wild fear-mongering:

And yet we have already reached the point where a Bitcoin crash could have serious global implications. Financial institutions’ current exposure to the cryptocurrency is unclear, and probably would not be fully revealed until after a financial disaster. It is eerily reminiscent of 2007 and 2008, when no one really knew where the exposure to subprime-mortgage debt ultimately lay. Until the crash, it was anyone’s guess which institutions might be insolvent.

James cites no evidence of financial institutions’ exposure to cryptocurrencies. Unlike mortgages in 2007, known commercial and investment bank balance sheets indicate no significant holdings of cryptocurrency assets by the institutions. Asked about cryptocurrencies, European Central Bank chief Mario Draghi commented on 5 February 2018 that bank exposure was not evident: “Let me first say that we are not observing a systemically relevant holding of digital currencies by supervised institutions — by banks, in other words.” As he went on to add, banks do not hold them precisely because cryptocurrencies are indeed very risky investments. A Forbes blogger in December, imagining bank losses from cryptos, was to his credit willing to acknowledge: “Of course, this is a doomsday scenario and there’s no evidence that big banks have garnered large positions in Bitcoin or other currencies — yet.”

The only apparent (albeit minuscule) exposure of banks, one mentioned in recent news reports, is via credit-card customers who charge such large cryptocurrency purchases to their cards that a plunge in crypto prices might make them personally bankrupt and force them to default on card payments. No problems from credit-card losses of this kind have yet been reported, however, and the card-issuing banks are fully able to price or quantitatively limit such a risk. Coindesk reports that JPMorgan Chase, Bank of America, Citi, and Capital One are now in fact disallowing cryptocurrency purchases by their credit-card customers. Of course the banks already cap the size of their customers’ credit lines to limit default risk, and charge additional fees when they allow customers to take (limited) cash advances.

A bank that allows its customers to use a debit card or other form of deposit transfer to buy cryptocurrencies, it should be noted, is not extending credit to those customers and is not exposing the bank to any risk of credit losses from crypto price volatility.

In 2007, by contrast, regulators looking at audited balance sheets knew which banks were holding how many billions of dollars in mortgages and mortgage-backed securities (MBS). (Granted, the regulators were unaware ex ante of how risky the mortgages and MBS were.) Total MBS outstanding in 2007 and 2008 were over $9 trillion, by the way. The total volume of cryptocurrencies outstanding today is under $400 billion, less than 1/20th of $9 trillion, and cryptocurrency purchases on outstanding bank card balances must be a very tiny fraction of that. Again, there’s no evidence of banks or investment banks holding crypto positions. So today’s situation is hardly “eerily reminiscent” of 2007-08.

James’ phrase “financial institutions” covers more than banks, of course. And there are a small number of speculative financial institutions buying cryptocurrencies for their customers, namely specialized hedge funds and proprietary trading firms. Pantera Capital offers a leading cryptocurrency investment fund. The CEO of Pantera notes that the crypto market is remarkable for the nearly complete absence of institutional investors: “It’s a half-a-trillion-dollar asset class that nobody owns. … And bitcoin is still so underowned by institutional investors that it trades at its own beat.” At the mid-December BTC price peak, the firm reportedly had about $2 billion under management. Half of that value has been lost, but without any apparent spillover effects. Hedge fund shareholders are high-net-worth individuals who can afford speculative losses to parts of their portfolios. Contrary to James’ fear that “a Bitcoin crash could have serious global implications,” the halving of Bitcoin’s value over the last two months shows no worrisome spillovers to the financial system more generally. It provides no rationale for restricting the public’s right to buy or hold or use cryptocurrencies.

[Cross-posted from Alt-M.org]

Imagine that it’s your first day at a new job. As you endure the tedious onboarding process, an interesting tidbit catches your attention; among the perks of your new position, you will be issued a company car and cell phone. “Sweet!” you exclaim, now more confident than ever of having made the right career move. But your enthusiasm drops precipitously as you learn that GPS devices have been installed on both the car and phone, allowing the company to continuously track your location. And your shock turns to horror when you are informed that the (mandatory) use of these items requires that you consent to the police having unfettered access to the resulting information, thus waiving your Fourth Amendment rights. While commenting on what a huge mistake accepting the position was on your way out the door, HR drops perhaps the biggest bombshell of all: “Sorry you feel that way, but it’s the city’s rule, not ours, and every other company in the field has the exact same rules… so good luck finding another job!”

Incredibly, such a dystopian scenario could become commonplace if the City of Chicago has its way.

LMP Services is a company owned by Laura Pekarik, who has operated the “Cupcakes for Courage” food truck since 2011. About a year after starting her business, Chicago passed ordinances requiring food trucks to install GPS trackers and to refrain from operating within 200 feet of established restaurants. LMP then sued to prevent enforcement of these laws—and is capably represented by our friends at the Institute for Justice.

While this case ostensibly involves food trucks in Chicago, if the Fourth Amendment fails to protect against laws like these, then there is very little to prevent cities and states across the country from extending similar regulations to virtually any other disfavored economic activity. In erroneously ruling that these requirements don’t involve an unreasonable search and don’t intrude on any liberty interests, the Illinois Appellate Court employed two lines of reasoning.

First, the court found that there was no Fourth Amendment “search” because there was no physical intrusion by the government. But this ignores the well-established rule that compelling a private party to carry out the equivalent of a search rather than conducting the search itself does not allow the government to avoid constitutional scrutiny. That’s precisely the situation here, as Chicago tried to shirk constitutional limitations by forcing food-truck owners to install the tracking devices and then having the information sent to a private company rather than to the government itself.

Second, the court found that there was no search because being allowed to operate a food truck is subject to a revocable license. Because the government isn’t required to issue such licenses, it’s supposedly free to condition issuance on the vendor’s consent to the placement of the GPS device. But under this rationale, what’s to prevent a state from conditioning (for example) a commercial driver’s license on drivers’ consenting to random police searches? While anyone with even a passing familiarity with the Fourth Amendment would find this absurd, there is no principled basis for preventing such measures under the court’s reasoning.

One might logically ask why on earth Chicago would have enacted these restrictions in the first place. The most plausible answer comes when examining the other ordinance at issue—the “200-foot rule” that prevents food trucks from operating close to other businesses that prepare and sell food to the public. As even the city’s representatives have admitted, this is a purely protectionist measure designed to shield brick-and-mortar restaurants from competition. The Appellate Court didn’t merely turn a blind eye toward such favoritism; it specifically endorsed it by finding that favoring one class of merchants over another was justified by the city’s need to “strike a balance” between higher-tax-paying restaurants and lower-tax-paying food trucks. Needless to say, conditioning a party’s rights on the amount of taxes it pays is a dangerous precedent indeed.

Finally, these protectionist measures have achieved predictable results, with the already-low total of 120-130 licensed food trucks in 2012 dropping to only 70 as of last year. That’s not exactly a win for hungry consumers who want reasonably priced snacks!

Because these measures are detrimental to Chicago’s consumers and entrepreneurs—and indeed all residents’ constitutional rights—Cato has joined the Illinois Food Truck Owners Association and National Food Truck Association on an amicus brief supporting LMP Services’ appeal of the Appellate Court’s erroneous judgment. The Illinois Supreme Court should hear this case and rule that overtly advantaging market competitors and forcing merchants to forego Fourth Amendment protections cannot be countenanced as just another cost of doing business. Instead, this is a disgraceful abuse of power that’s repugnant to a free and open society.

Perhaps most importantly, when you think of all the great culinary delicacies that Chicago is known for – regardless whether deep-dish pizza is pizza, it’s delicious – it would be a crying shame to deprive the city of food trucks.

The Trump administration’s 2019 budget would eliminate funding for the Manufacturing Extension Partnership (MEP) run by the Department of Commerce. The Wall Street Journal reported on the proposal the other day, although the article read more like an oped by program supporters.

The MEP shells out $140 million a year of taxpayer money to more than 50 offices around the country that aid local businesses. Tad DeHaven and I discuss some of problems with the MEP here.

One problem is that such corporate welfare necessarily favors some businesses over others. Companies receiving MEP aid are given an unfair edge over competitors. The MEP’s annual report does not actually say which particular companies have been aided. Instead, it is full of dynamic-sounding language such as “technology acceleration,” “learning organization,” “high-performance system,” “technology-centric operations,” “cultivate enduring collaborations,” and “actionable items for implementation.”

The MEP suffers from the usual waste and abuse of federal subsidy programs. In one classic case, the MEP charged taxpayers $1.1 million for a big party (I mean “conference”) at a resort in Orlando, with free food, booze, live music, and a trip to Disney World.

In another taxpayer rip off, the South Carolina director of an MEP-funded group (p. 29) submitted fraudulent documentation for $336,000 of expenses, including “contracts and payments to shell corporations that were controlled by friends, family members, and him/herself for work that was not completed.” She was sentenced to 27 months in jail, and then was charged with trying to cover up a further $1 million in dubious MEP charges.

My assistant, Dave Kemp says, “What do you expect, it’s the government?” True, but the fact that such handout programs are routinely abused is a good reason to terminate them.

If we eliminated the MEP’s handouts, we could also eliminate the MEP bureaucracy. The agency has about 100 employees making an average $160,000 a year in wages and benefits, according to the federal budget.

To its credit, the Trump administration has proposed various cuts to corporate welfare, and it has reduced tax and regulatory burdens on businesses. Unfortunately, the administration’s protectionist trade actions are a form of corporate welfare that undermine the benefits of its pro-growth policies.

The MEP’s 2016 annual report leads off with a paean to Alexander Hamilton’s 1791 Report on Manufacturers, which was a call for economic central planning. Fortunately, the Jeffersonian free-enterprise view mainly held sway in subsequent decades, and American industry rose to greatness not because of Hamilton/MEP-style subsidies, but because of the sacrifices and struggles of generations of bold entrepreneurs.

After a third consecutive day of attacks, the Syrian government has killed over 250 people in Eastern Ghouta, a region near Damascus. The Syrian Observatory for Human Rights stated that the death toll included 58 children and 42 women, and will most likely rise as the attacks continue.

The Assad regime, backed by Russia, claims that the attacks, which include air strikes and barrel bombs, are necessary to rid Eastern Ghouta of terrorists. Eastern Ghouta is the last rebel stronghold and home to both Jaysh al-Islam, a Syrian opposition militia that routinely attacks the Assad regime, Islamic State, and selective Kurdish forces, and the al Qaeda affiliate Hay’at Tahrir al-Sham, which aims to overthrown the Assad regime and replace it with the Islamic Emirate of Syria. Meanwhile, Turkish forces attacked a pro-Syrian government force yesterday in the Afrin district, another contested zone in northern Syria, in order to halt reinforcements to the Kurdish YPG militia.

The Syrian civil war has entered a new, more violent and dangerous phase. Who will come out on top when/if the violence ebbs? It will most likely be the Assad regime because: 1) the regime has strong sponsors in the form of Russia and Iran, and 2) the international community has no coherent practical response to the ongoing violence.

Russia intervened in the Syrian civil war early on in an attempt to protect its key naval base at the Tartus Port in Syria. Last year, Russia signed into law an agreement it made with the Syrian government that would allow nuclear-powered Russian warships to dock at the port. In order to accommodate these large ships, Russia has expanded its port activities and brought in weapons, ammunition, and other materials to secure its activities without any regulation or oversight by the Syrian government.

Iran has vested interests in the Assad regime and has provided weapons and ammunition, arms, oil transfers, lines of credit, and military advisors (and ground forces—though Iran denies this). Iran’s relationship with the Assad regime is connected to their joint sponsorship of Hezbollah, a terrorist group that now functions as a political party in Lebanon—and which Israel considers a grave threat. Iran’s alleged goals for regional primacy, therefore, are somewhat dependent on the Assad regime’s stability.

Over the course of the Syrian civil war, other stakeholders have emerged that include the Gulf states, the United States, and Turkey. While the Gulf States (mostly Saudi Arabia) are primarily concerned with what they view as Iran’s quest for regional dominance, the United States has been more concerned with the spread of ISIS. U.S. forces have been successful in preventing the further spread of ISIS into Syria with the help of Kurdish militia groups. As these groups continue to receive U.S. support, U.S.–Turkey relations are experiencing a low point as Turkey defends its campaign against the Kurds.  

This hodgepodge of strategic interests and short-term goals has paralyzed the international community. Each attack on Syrian civilians results in empty rhetoric from leaders unwilling or unable to do anything to improve their lot. On occasion, diplomacy has been used to reduce violence. For example, Eastern Ghouta is technically a part of the “de-escalation zones” that were established under a diplomatic ceasefire initiative between Russia, Iran, and Turkey. But because of Hay’at Tahrir al-Sham’s presence (which is minor at best), whose affiliation with al Qaeda did not make it part of the diplomatic deal, Eastern Ghouta has become fair game for Syrian government attacks again.

The ongoing Ghouta attacks indicate that the Assad regime remains strong. The international community’s inability to halt chemical attacks, ensure availability and access to humanitarian aid to those injured on the ground, and convince the Assad regime and its allies to seek a political settlement over a pure military victory all point to how the world has failed the Syrian people. As the Syrian civil war spirals out of control, each stakeholder is more concerned with safeguarding its own strategic interests rather than finding a feasible solution to end the violence. In the meantime, Syrian civilians will continue to pay the price of this war.

In sports—including the current Winter Olympics in South Korea—the concept of the “home field advantage” is pervasive. But in government, separating powers among three branches is supposed to protect individual liberties when the government pursues someone for an alleged legal infraction.

Well, Raymond Lucia felt that the Securities and Exchange Commission had such an advantage when he was fined $300,000 and barred from working as an investment adviser after an SEC administrator determined that he had misled prospective clients in a quasi-judicial proceeding that the SEC investigated, prosecuted, and adjudicated without any appreciable oversight.

Lucia fought the SEC, because the agency’s administrative law judges (ALJs) are, in fact, “officers” of the SEC and not mere employees, meaning that under the Constitution’s Appointments Clause, they should have been appointed by and be accountable to the president or a department head. As the Supreme Court held in a similar challenge to the Public Company Accounting Oversight Board in 2010, “if any power whatsoever is in its nature executive, it is the power of appointing, overseeing, and controlling those who execute the laws.” The president has a duty to ensure the law is faithfully executed, and to do so he must be able to remove those officers who fail to uphold their duties.

The U.S. Court of Appeals for the D.C. Circuit deadlocked over the issue of whether ALJs are executive officers and thus subject to the removal power. As it stands, they’re protected from control by the electorate because the president currently lacks the ability to remove ALJs who abuse their powers or otherwise act badly. Cato supported Lucia’s successful petition for Supreme Court review. Now we file on the merits, ahead of oral argument.

The duties of an ALJ are similar to other positions the Court has previously held to be officers, including “special trial judges” and court clerks. If anything, ALJs have more power and discretion than STJs or clerks, and thus it’s critical that they be able to be held accountable.

Both Congress and the SEC have recognized that ALJs are officers. That conclusion borders on the obvious considering how much more closely the ALJ position aligns with historical and legal definitions of an “officer,” despite the fact that the name of the position was changed to include the word “judge.” Indeed, the fact that ALJs play a quasi-judicial role does not change the fact that they aren’t judges in the constitutional sense. After all, the Supreme Court established 90 years ago that presidential accountability still applies to officers with a quasi-judicial function.

The Framers knew how to create an independent judiciary; they successfully did so in Article III of our Constitution. This independence, however, can’t constitutionally be extended to officers in the executive branch, no matter what they call themselves. The ALJ corps is not a junior-varsity team of Article III judges. They are executive officers, period. To effectively extend Article III independence to an Article II officer, regardless of the title attached to the particular positions, would be to create a fourth branch of government (or fifth, or sixth, depending on how one counts various parts of the existing bureaucracy).

The Supreme Court should find ALJs to be “officers of the United States” and thus make them subject to presidential appointment and removal. Oral argument in of Lucia v. SEC hasn’t yet been scheduled, but is expected this April, which would mean a decision by the end of June.

I’ve got the story at Overlawyered

The Equal Employment Opportunity Commission has announced that Mission Hospital in Asheville, N.C. will pay $89,000 for failing to accommodate employees “who declined flu vaccinations based on their religious beliefs.” [EEOC press release] Mission had in fact agreed to exempt employees from the flu shot based on religious objections, but required that they declare their intention ahead of time. And that turned out to be not accommodating enough, since not requiring that extent of advance notice would not in the EEOC’s view have posed an undue hardship on the employer — hence the expensive lesson….

Under the elastic “undue hardship” standard, employers may face much uncertainty as to how much disruption of their business they must put up with in the name of accommodation. The flu-shot example suggests that risks to co-workers, customers, and the general public might sometimes enter the calculus as well — an expensive guessing game at best.

More about obligations of religious accommodation under federal law, including the elastic way they tend to shrink or expand these days based on the ideological uses to which they are put, at the link. Here, however, I’d like to make a different point. Libertarians take a lot of flak because some of our number criticize mandatory government vaccination as an infringement of principles of voluntary association (though many other self-described libertarians do not in fact take this view). But in the case of Mission Hospital – a private, not-for-profit institution – principles of voluntary association lead directly to the view that the hospital should be free to require such measures of its workforce, whether to avoid risks of direct contagion, to set a good example when urging patients to vaccinate, or from other rationales. Yet here the federal government deploys its full force to prevent private and voluntary social mechanisms from being brought to bear to get a potentially high-risk group to undergo vaccination. 

Flu season is not over and this year’s strain has proved particularly deadly, by the way, so please consider protecting your family and loved ones if you have not already. Details here and here

Here’s the great thing about driverless cars: They will need no new infrastructure because the people designing them are making them work with existing infrastructure. All they ask is for cities and states to fill the potholes and do other basic maintenance.

Here’s another great thing about driverless cars: Most congestion results from slow human reflexes, and simulations show that congestion will significantly decline if as few as 5 percent of vehicles on the road are driverless. So, even if you don’t have a driverless car, you will benefit from others being driverless.

So why is Bexar County (San Antonio) Commissioner Kevin Wolff proposing to use federal infrastructure dollars to build new interstate highway lanes open only to driverless cars? On one hand, they don’t need special lanes. On the other hand, separating them from other traffic eliminates the congestion relief benefits they can provide.

Kevin Wolff is the son of Nelson Wolff, San Antonio’s leading streetcar supporter and a long-time proponent of pork barrel in general (among other things, he has a stadium named after him). Kevin opposed the streetcar, but he supported another even more foolish rail-transit proposal.

The state of Texas is planning to add four lanes to relieve congestion on Interstate 35 in San Antonio. All four would be “managed,” meaning tolled to make sure they never get congested. Wolff’s idea is to dedicate two of those lanes to driverless cars, which means two fewer lanes for other people to use.

Kevin says he floated his driverless-lane idea to the Trump Administration, which has proposed to spend $20 billion on “innovative” infrastructure projects. “They told me, ‘This is just the kind of proposal we want to fund,’” he said.

Actually, it is just the kind of proposal they should not fund. It isn’t necessary. It doesn’t relieve congestion and will probably make it worse than having four managed lanes. It doesn’t help restore crumbling infrastructure. It merely adds more infrastructure that won’t have a source of funds to maintain it.

It can be hard to track exactly what is going on with trade negotiations, and when the news reports are actually a big deal. Each round of negotiations generates headlines, but often leads to nothing except for another round of negotiations. But yesterday the 11 governments negotiating the Trans-Pacific Partnership released a revised version of the text of the agreement, which is kind of a big deal, because you never know for sure how much progress governments are making until they show you the final document. Releasing the text indicates that this agreement is definitely going forward, with signing and ratification coming soon. And of most relevance for Americans, it is going forward without the United States, as President Trump withdrew from the agreement soon after he took office.

What’s in this deal? New Zealand has provided a good summary of what it thinks it is getting from the agreement in terms of lower tariffs and other items (and which U.S. businesses won’t be benefitting from). Here are just a few examples:

  • Japan will reduce its 38.5% tariff on beef to 9% over 16 years.
  • Japan’s tariffs on offal and processed meats will be eliminated over 11–13 years with a 50% reduction at entry into force. 
  • Tariffs on most cheese types will be eliminated in Japan over 16 years.
  • Malaysia will eliminate liquid milk tariffs over 16 years. 
  • All tariffs on apples would be eliminated within 11 years.

That’s all very good news for the countries who are part of the agreement. But as the United States is no longer part of the agreement, there are no direct benefits to Americans. It’s also worth noting that the revisions to the TPP which occurred after the United States withdrew, and which provided the basis for the other countries to go ahead, were suspensions of provisions that the United States had wanted in there.

Of course, the United States could negotiate its own trade agreements with these same countries. But that hasn’t happened. Back in November, I asked: “We are now nine months into the Trump administration, and it’s reasonable to ask: where are all the new trade deals that were promised?” Now we are more than a year into the Trump administration, and the falling behind on trade just keeps falling further.

Last week Robert S. Mueller III, the special counsel, indicted 13 Russians for intervening in the 2016 United States election. Two of the charges  - buying political advertisements and mandatory disclosure - bear on free speech.

Much of the indictment documents activities during the election that would be both normal and protected by the Constitution if undertaken by American citizens. The defendants bought political advertisements, staged political rallies, and even “posted derogatory information about a number of candidates,” Hillary Clinton in particular. Lacking all scruples, they are said to have “solicited and compensated real U.S. persons to promote or disparage candidates” which means paying an actress to impersonate Hillary Clinton in jail. The defendants tried to create “political intensity through supporting radical groups, users dissatisfied with [the] social and economic situation and oppositional social movements.” Overall the Russians hoped “to sow discord in the U.S. political system.”

As it happens, all this activity may be illegal because the Russian government supported these activities. The Federal Election Commission concisely explains regulation 110.20: , “The Federal Election Campaign Act (FECA) prohibits any foreign national from contributing, donating or spending funds in connection with any federal, state, or local election in the United States, either directly or indirectly.”  The Commission notes that this ban “was first enacted in 1966 as part of the amendments to the Foreign Agents Registration Act (FARA), an “internal security” statute.  The goal of the FARA was to minimize foreign intervention in U.S. elections by establishing a series of limitations on foreign nationals.” FARA also required agents of foreign principals to register with the federal government presumably, as the indictment says, so “the people of the United States are informed of the source of information and the identity of persons attempting to influence U.S. public opinion, policy, and law.” (It should also be noted that the defendants are charged with several counts of fraud and identity theft).

These two parts of the law establish different rules for different audiences. Voters in an election are prohibited from hearing speech funded by a foreign power. Arguably, they are prevented from hearing any speech by an employee of a foreign government; such speech would  involve indirect spending on an election. Other listeners, unnamed in the law, need not be prevented from hearing speech of foreigners “attempting to influence U.S. public opinion, policy, and law.” The public, apart from electoral appeals, and public officials, including above all members of Congress, may hear foreign speech assuming disclosure of its source. Voters, however, should be, and are protected from such speech.

The law seems informed by the following assumptions. Public officials need to hear foreign views, especially about international affairs. They have the ability to sort out the false from the true if they know who is behind the arguments. In contrast, voters might be moved by foreign speech to the detriment of the nation. Hence, voters must be prevented from hearing such speech even if its source is disclosed. To put it mildly, this distinction between officialdom and voters is contrary to the foundations of freedom of speech. If voters lack this basic capacity of citizenship, why protect speech through the First Amendment? The distinction seems paternalistic.

There’s little evidence that the Russian efforts had much effect on the voters in 2016. The New York Times indicates that the Russians may have persuaded a few people to show up at a small anti-Muslim rally in Texas. Speculation about others effects does abound, as the Times article shows. However, as Brendan Nyham indicates, political science research shows how hard it is to change votes even with significant spending. The Russian effort was a miniscule portion of overall spending in 2016.

The law is the law, and the indictment made a good enough case against the defendants that at least 12 grand jury members endorsed the charges. But the indictment comes at a difficult time for free speech. Facebook and other tech giants have been put on the defensive in DC. For some, only foreign malevolence could propel a man like Donald Trump to the White House. Fears about national security can foster public actions that otherwise would be rejected.  This might be one of those moments when something must be done and the “something” that is selected does real harm to freedom of speech. That outcome could easily be worse than whatever threat the Russians pose to American democracy.  

New York Attorney General Eric Schneiderman demands out-of-state charities disclose all donors for his inspection. He does not demand this of all charities, only those he decides warrant his special scrutiny. Schneiderman garnered national attention for his campaign to use the powers of his office to harass companies and organizations who do not endorse his preferred policies regarding climate change. Now, it seems he seeks to do the same to right-of-center organizations that might displease him. Our colleague Walter Olson has cataloged Schneiderman’s many misbehaviors.

He’s currently set his sights on Citizens United, a Virginia non-profit that produces conservative documentaries. While Citizens United has solicited donations in New York for decades without any problem, Schneiderman now demands that they name names, telling him who has chosen to support the group. Citizens United challenged this demand in court, arguing that to disclose this information would risk subjecting their supporters to harassment and intimidation.

These fears are not mere hyperbole. If the name Citizens United rings a bell, it’s because the organization, and the Supreme Court case of the same name, has become the Emmanuel Goldstein of the American left, complete with Democratic senators leading a ritualistic two minutes hate on the Senate floor. In 2010, the Supreme Court upheld its right to distribute Hillary: The Movie, and ever since “Citizens United” has been a synecdoche for what Democrats consider to be the corporate control of America. Is it unwarranted to think that their donors might be subjected to the sort of targeted harassment suffered by lawful gun owners, or that Schneiderman might “accidentally” release the full donor list to the public, as Obama’s IRS did with the confidential filings of gay marriage opponents?

The Supreme Court has long recognized the dangers inherent in applying the power of the state against the right of private association. The cornerstone here is 1958’s NAACP v Alabama. For reasons that hardly need be pointed out, the NAACP did not trust the state of Alabama, in the 1950s, to be good stewards of its membership lists. “Inviolability of privacy in group association may in many circumstances be indispensable to preservation of freedom of association, particularly where a group espouses dissident beliefs,” wrote Justice John Marshall Harlan II, who went as far as to compare such demands to a “requirement that adherents of particular religious faiths or political parties wear identifying arm-bands.” More recently, Justice Alito pointed out in a similar context that while there are undoubted purposes served by reasonable, limited disclosure requirements, the First Amendment requires that “speakers must be able to obtain an as-applied exemption without clearing a high evidentiary hurdle” regarding the potential harms of disclosure.

But the Second Circuit Court of Appeals has decided it knows better than the Supremes. On Thursday, it ruled that Citizen United’s challenge should be thrown out without even an opportunity to prove their case. In the process, it effectively turned NAACP into a “Jim Crow” exception to a general rule of unlimited government prerogative to panoptic intrusion into citizen’s political associations. While there can be no doubt that the struggle for civil rights presented a unique danger for its supporters, this should not mean that only such perils warrant First Amendment protection.

The marketplace of ideas is often fraught with contention, and those who support controversial causes must shoulder some risk. As the late Justice Scalia argued, that “running a democracy takes a certain amount of civic courage.” But anonymity in such pursuits serves important purposes, and the premise that concealment of one’s identity is a sign of ill-will would have surprised James Madison, who published numerous defenses of the new constitution, convincing his fellow citizens of the virtue of the endeavor; he signed them “Publius.”

In our schismatic political climate, many people could suffer if their political views were made widely known. This could include everything from adverse employment actions to outright violence. Some groups, such as those in the “antifa,” have openly advocated violence against political opponents. It’s odd that some on the modern left find themselves on the same side as the state of Alabama in 1958: arguing that those who support some political views should be disclosed to the state, even if violence might result. Although an appeal has not yet been filed, the Supreme Court should take the case and reverse the Second Circuit, making it clear that a compelling government interest is required before the government can force the disclosure of people’s political affiliations.   

The Maryland Transit Administration suddenly shut down the Baltimore Metro last week, forcing commuters and other riders to find alternatives with less than 24 hours’ notice. The state said an inspection had found unexpectedly excessive wear on the rails that could have caused a derailment, and it plans to keep the line closed for a month while it fixes the problem – and then to close it again this summer for further work.

The coincidence that the shut-down took place the same day the White House announced its infrastructure plan led the Washington Post to call the metro the latest poster child for the need for more infrastructure spending. In fact, it is a poster child for less infrastructure spending, as it should never have been built in the first place.

 Productivity of United States Metro Systems

Thousands of Trips Per Year

  Trips/mile Trips/station Subsidy/Trip New York Subway 3,211 5,699 $1.64 NY-NJ Path 2,049 6,794 1.60 Boston 1,615 3,231 2.66 Los Angeles 1,349 2,875 7.82 Philadelphia-SEPTA 1,020 1,358 16.05 Washington 852 2,738 1.96 Chicago 900 1,645 4.56 Atlanta 693 1,893 6.08 Oakland 510 3,105 3.48 Miami 368 933 5.18 Baltimore 359 872 6.92 San Juan 322 513 9.17 Staten Island 271 391 2.34 Philadelphia-PATCO 277 819 3.23 Cleveland 168 356 3.11

“Subsidies” equal operations & maintenance divided by fares. Source: 2016 National Transit Database.

As the above table shows, Baltimore’s metro is one of the least-productive and most subsidized heavy-rail lines in the country. It’s even worse when stacked up against metro’s worldwide. Of 158 metros for which data is available, Baltimore’s ranked 150th in trips per station and 152nd in trips per mile.

A 1990 US DOT report found that the first 7.6-mile segment was supposed to cost $800 million to build but actually cost $1.3 billion (about $1.5 and $2.4 billion in today’s dollars). It was supposed to carry 103,000 riders per weekday, but in its early years it only carried about 43,000. Maryland has since extended the line to 17 miles, yet weekday ridership in 2016 was less than 41,000, effectively meaning the extensions attracted no new riders.

To make matters worse, Baltimore bus ridership declined from 106.1 million trips the year the Metro opened to 75.6 million trips in 2016. Since Baltimore light-rail and Metro lines together carried less than 20 million trips in 2016, transit ridership would have done better if the state had put a much smaller amount of money into bus improvements.

Baltimore Metro cars have 76 seats yet carry an average of just 11.5 riders over the course of a day, which is fewer than the 13.5 passengers carried by Maryland Transit buses. Buses also cost less to operate: in 2016, MTA spent $15.73 per vehicle-revenue mile on operations and maintenance for its buses but $17.60 per mile for its Metro railcars.

In other words, buses could have performed the job of the metro for a lot less money. Now that the line is more than 30 years old and worn out, it should be replaced with buses. Instead, they are going to spend millions of dollars making token fixes and let passengers suffer increasing reliability problems.

Naturally, Maryland Governor Larry Hogan blames previous administrations for underfunding maintenance. Yet he has been in office now for more than three years, so he can’t really blame the problems on previous administrations. Why didn’t the transit authority detect the track wear sooner? Why weren’t they able to fix the problem when they were recently single-tracking the line for maintenance work?

One answer is that Hogan and his Department of Transportation have been focused on new projects rather than maintaining old ones. He was the one who decided to build the Purple Line, which will cost more than $2 billion and make congestion worse. He is also pushing for a ridiculously expensive mag-lev line from Baltimore to Washington.

This is what politicians, even supposedly fiscally conservative ones like Hogan, do: go for the glory rather than the mundane. That’s why Trump’s infrastructure plan should, but doesn’t, dedicate funds to maintenance rather than new construction. That’s why infrastructure should be funded out of user fees rather than taxes. Unfortunately, for too many the only lesson of the Baltimore Metro line is that someone else ought to pay more money to keep it running.

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